John Brynjolfsson Is Betting On Convergence in Europe, Playing the Curve in US
John Brynjolfsson, the CIO at the hedge fund Armored Wolf, is betting on convergence. In his view, the credit quality of the banks and people of Germany and France, will soon look like the credit quality in Spain and Portugal. I featured a video of his ideas a couple of weeks ago but he had more time this past week to talk about his trading ideas. His trade is predicated on the "all for one, one for all" which he believes will result from any euro crisis solution. The clip with Tom Keene runs 13 minutes.
His comments about the poor risk/reward in Treasuries are spot on. As I was saying a couple of months ago, Treasuries were priced for a full-on disinflation/deflation scenario. There was no wiggle room. Since then, yields have backed up and people who were leveraged to the long end of the curve have been savaged. Some are now talking about 5% on the 10-year. I doubt it; but if the 10-year does get to this level, that would spell the end of the recovery via the mortgage market and house prices.